Bitcoin BTC$67,092.67 tumbling to $67,000 may signal a challenging summer ahead as investor capital continues flowing into artificial intelligence (AI) stocks and away from crypto.

In a Tuesday report, K33 Research head Vetle Lunde said bitcoin's weakness reflects fading institutional demand, heavy ETF outflows and growing vulnerabilities in derivatives markets.

"Much of the market views the opportunity cost of holding BTC as too high while anything AI-related soars," Lunde wrote.

The divergence has become increasingly difficult to ignore. Bitcoin has failed to reclaim its 200-day moving average while the Nasdaq and S&P 500 continue setting record highs. Investors are also looking ahead to potential IPOs from companies such as SpaceX and Anthropic, which may be drawing capital away from crypto, Lunde argued.

That rotation is evident in bitcoin ETF flows. Spot bitcoin exchange-traded products shed 62,794 BTC over the past three weeks, the second-largest outflow streak on record, the report noted.

K33 said ETF selling accelerated after bitcoin's failed attempt to break above its 200-day moving average last month.

$60,000 bottom being questioned

The shift in tone marks a notable change for K33. The firm previously argued bitcoin's plunge to around $60,000 in February likely marked the deepest drawdown of the cycle. A key part of that thesis was unusually negative funding rates in perpetual futures markets, which reflected persistent bearish positioning and created conditions for powerful short squeezes.

That setup helped fuel bitcoin's rebound toward $83,000. But the rally ultimately stalled at the 200-day moving average, a level that has capped previous bear market rallies.

Today, the derivatives picture looks very different, Lunde said. CME bitcoin futures open interest has fallen to its lowest level since October 2023, a sign that institutional traders are reducing exposure. Meanwhile, funding rates in perpetual futures have risen alongside open interest even as bitcoin falls, suggesting leveraged longs are building into a weakening market.

While the firm has not completely abandoned its view that $60,000 marked the cycle low, the tone has become more defensive.

"We read the latent selling pressure in those leveraged longs as a warning of possible deeper lows and advise caution," the report said.

K33 still sees bitcoin as undervalued relative to equities over the long run. But with institutional demand fading, ETF investors heading for the exits and capital chasing stronger-performing sectors, the firm says the market faces a tougher backdrop than it did just a few weeks ago.

"With outside capital reluctant to enter and existing holders trimming exposure, we may be in for a choppy summer," Lunde wrote.